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Do Modular Buildings Depreciate Quickly?

Modular buildings have changed a lot in the way building construction is done. They are constructed in a process that is far more efficient than traditional construction even though they are designed to meet the same International Building Code. They also have a lot of advantages, ranging from lower cost and faster delivery time to being very customizable.

Despite their immense advantages however, modular buildings are not great for everyone and they don’t work in all circumstances. They have disadvantages which means there are situations where it will not make sense to go for one.

It is important that you understand exactly in what situations modular buildings will work for you before taking the decision to commission one.

In this article, we discuss two frequently asked questions: do modular buildings depreciate quickly? What are the disadvantages of modular buildings? Let’s take them one at a time.

Modular buildings do depreciate quickly

True, compared to traditional buildings, modular buildings depreciate in value pretty quickly. Depreciation is the rate at which an asset loses value. It is also an accounting term that denotes the measurement of that decline in value, over the years.

In order to understand why modular buildings depreciate quickly, it is important to understand how they are classified under tax laws.

Generally, property may be real or personal. Real property is considered to be immovable, fixed to one place at all material times. Buildings that are constructed through traditional construction are perfect examples of real property. You just can’t up and move them elsewhere.

Personal property, on the other hand, is the direct opposite. It is considered to be movable. It usually includes all sorts of property like cars, generators and basically anything that can be moved. This often includes portable buildings as well, essentially modular buildings.

Thus, modular buildings are often classified as personal property because they are (relatively) easy to move and so, they depreciate quickly. The reason for this quick depreciation is strains of movement. Although modular buildings are made to be even stronger than traditional buildings so they can withstand the strain of being moved, this is one quality that contributes to the perception that the depreciate quickly.

Although, when Permanent Modular Construction (PMC) is used, as against relocatable buildings, modular buildings may no longer be treated as personal property. This is because they are made to be permanent and thus avoid the strains of movement. However, relocatable buildings do depreciate quickly.

But that’s not always a bad thing!

In fact, it can be great for you, if what you need is a relocatable building. Under the tax laws, taxpayers can claim a depreciation relief for the decline in value of their assets. And the faster the asset depreciates, the faster you can claim on the asset.

This means that you can quickly recoup your investment on a modular building, in as short a period as 7 years! That can only be good for you.

Of course, this works best if you need the building for business purposes and do not really intend to reap very high sell on value from the property.

Possible disadvantages of modular buildings

As we stated earlier, there are certain factors that may make modular buildings not so desirable for some clients. You should have a good knowledge of these factors before you go for a modular building. They include the following:

There’s a ceiling on design considerations

Due to the fact that modular buildings have to be transported from the assembly plant to the construction site, they cannot be made of heavy materials like brick and mortar.

Modular buildings need to build with lean materials in mind so the units will be easily shippable. Besides, all modular units have a height and weight limit. To be transported by lorry, each load must be within 3.6m wide, 4.2m-4.5m high and 15m long.

This means that modular construction cannot cater to all building types as yet. So, if what you have in mind is a large Victorian with cut stone and all, modular may not work for you.

Also, the limit on load size may affect the size of each module and the rooms they will eventually constitute. So, you may end up having small room sizes. Although, this challenge can be bypassed by constructing large rooms in modular sections. But if what you want is high ceilings and walls, it may not work for you.

Design reviews are limited

In modular construction, as soon as the design of the building is settled on, construction begins in earnest and it can move very quickly. This is largely because construction on the modular units themselves begin at the same time as the foundation and site are being prepared.

Due to this, design must be completed right at the beginning of the project. If you are the sort of client who has surges of new and better ideas, it would be best if you settle on everything quickly because once manufacturing starts, the starting design is locked in. From that point on, all manufacturing is made with that eventual design in mind.

Unlike traditional construction where you can still be debating what kind of finish you’d like in your kitchen up until the frame is fully constructed, there’s no room for that in modular construction.

In the event that you happen upon a better design that you simply must have, it will cost you much more than initially expected and will also delay the project. So, you basically won’t be able to have the luxury of numerous design changes later on in the project.

You can’t build modular in every neighbourhood

Building regulations and planning permission might be a barrier to modular construction in some neighbourhoods. This is because many of these regulations may have content that is still behind the innovations in construction.

Besides, some neighbourhoods have land restrictions that do not allow modular construction. So, even if you’re keen on the idea of modular buildings, you may still face challenges in this area.

Another challenge with neighbourhoods is the fact that some areas are simply unsuitable for modular buildings and the activity involved in their construction. Some neighbourhoods have access roads that are too narrow to allow the admittance of load bearing trucks.

In other instances, the site on which you want to construct may not be wide enough to accommodate heavy machinery like the cranes that may be needed to install the modules.

The cost of modular construction often varies

While modular construction will generally help you avoid a good chunk of the cost involved in traditional construction, the cost may be as high or even higher in certain cases.

So, while you may generally make a profit on student accommodation, budget hotels or school units, other applications like Build to Rent housing may come at a higher cost. Although it is important to note that the eventual cost will depend on your peculiar circumstances.

So, if you have any questions as to what modular will cost you or if you just want to know if it will work for you, you can get in touch with us. Call us on 01302 759447 or shoot us a mail at sales@wintechmodular.co.uk and we’ll get back to you with the answers you need.

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